Noah Goldman
Chief Operating OfficerIn this article
Are you looking to start your own property management company sometime soon? Starting a property management company can be rewarding if you are trying to break into the real estate industry.
As rental property demand continues to surge, property management companies are essential in ensuring all operations function smoothly. If you’re new to the industry and keen to launch your own property management company, this blog post highlights basic steps to get started.
Research the Job, Local Area, & Competition
Conducting careful market research is crucial before diving head-first into the property management world. Get familiar with the local real estate landscape, pinpoint potential competitors, and evaluate your area’s demand for property management services. These findings will help you customize your business model to meet the precise needs of your geographic location.
Create a Business Plan
A well-designed business plan is the basis of any successful endeavor and your roadmap for success. Begin creating your business plan by outlining your overall mission, vision, and goals. Next, define your target market, the services you plan to offer, and the pricing structure. Be sure to include a detailed financial plan that outlines your startup costs, anticipated revenue, and projected profits – it will ultimately serve as a roadmap for your company’s growth and success.
Deciding what services to offer and what niches to serve is a big part of the business plan development process. If you aren’t familiar with the term, a niche focuses on your specific type of property management services so prospective clients can easily find your business.
There are several types of property management you can focus on, such as single-family residential management, multifamily residential management, HOA management, and commercial property management. Single-family focuses on individual homes, while multifamily concentrates on condos or apartment buildings. With HOA management, there is more of a focus at the community level as it involves overseeing entire communities or condo complexes. Commercial property managers typically deal more with building operations, such as cleaning, safety, and maintenance.
It’s essential to set goals for your new business. Take time to thoroughly outline and spell out your short- and long-term goals. These clear, measurable goals are then formalized in your business plan. They should briefly describe how you will achieve each to truly resonate with your target market.
Set Up Your Business Entity, Financials, & Insurance
To establish credibility and trust with property owners and tenants, decide on a legal structure for your new property management company – examples include a sole proprietorship, an LLC, or a corporation. Consulting with a legal professional can help ensure compliance with local regulations and allow you to obtain the necessary licenses and permits.
Comprehensive financial planning and projections are critical to any property management business plan. In this part of the plan, include your estimated start-up costs (this can vary based on the scale and scope of your business), including licensing fees, office space leasing or procurement, IT investments, marketing costs, and initial staffing.
Also, obtaining insurance is imperative when running a property management business. It protects your company’s financial assets and helps maintain your professional reputation, comply with legal requirements, and meet client expectations.
An insurance policy, such as general liability and errors and omissions (E&O) coverage, protects your business from financial ruin in the event of potential lawsuits. For instance, insurance can cover your legal expenses if a property owner or tenant decides to sue you for wrongful eviction, negligence, or any other type of claim.
Insurance can also cover property damage, legal costs related to lease agreement disputes, data breaches, loss of rental income, legal and contractual requirements, and much more.
Client and Partner Expectations
Cultivating and fostering relationships with property owners in your community can help your property management company thrive. It not only sets expectations ahead of time but also helps potential clients comprehend exactly what your company offers.
Give partners and clients the chance to ask questions and offer feedback, and make an effort to keep communication lines open at all times.
Get Proper Business Licenses
Always check with your state and local government for proper business license requirements. Depending on your geographic location and the services you decide to offer, you may need to obtain specific licenses or permits – a property management license, general business license, or even a real estate license.
Set Up an Online Presence
A solid online presence is vital for any property management business, especially in a constantly evolving digital environment.
Take the time to design a business website that shows off your property management company’s services, team, and, most importantly, contact information.
Many property management companies also use social media platforms – think YouTube, TikTok, LinkedIn, Instagram, and Facebook – to connect with prospective clients and develop credibility in the real estate space. Consider putting aside some investment dollars in digital marketing strategies to reach a more wide-reaching audience.
Plan Operations Workflows
Develop efficient operational processes and systems for marketing your properties, tenant screening, lease management, maintenance, and financial reporting. Numerous types of user-friendly property management software are available on the market to help streamline operations and boost efficiency.
Develop Pricing Structure
Your property management business’ revenue model should be centered around fee structures. These might include fixed management fees, percentage-based fees related to rental incomes, leasing fees for new tenant placement, and other service-related charges. Remember, your pricing strategy should be competitive but sustainable, complementing current market rates with the quality of services being provided.
Set-Up Accounting and Management Software
Selecting the right accounting and property management software is an integral part of setting up your company for success. The right tools and software can help you keep track of critical financial data, make informed business decisions, and streamline your financial processes.
After you’ve picked the right software that best fits your needs, make sure you set it up for optimal performance. Areas to factor in include setting up your bank accounts, your chart of accounts you use to track transactions, and entering opening balances.
Hire Your First Employees
Never cut corners when hiring a competent team to handle various aspects of your new business. Create an organizational chart of roles and positions, including property managers, maintenance staff, and admin team. A skilled, dedicated team is crucial for delivering top-notch service and maintaining customer satisfaction.
Review your business plan and identify key roles to help you move forward. Next, develop a comprehensive job description that spells out concisely the responsibilities, requirements and expected skills of prospective hires. During your candidate search, identify those with related job skills and experience, and always screen applicants through their background, references and employment history.
Here are some top qualities to look for in applicants when developing your team:
- Expertise/Experience
- Integrity
- Compatibility
- Strong communication skills
Hiring and retaining the right property management staff is essential for your company’s bottom line and peace of mind.
Create and Deploy a Marketing Plan
To effectively grow your property management company, consider these marketing tips and tactics:
- Build your company’s website and hire a digital marketer to help with search engine optimization (SEO to drive clients to visit it.
- Launch social media accounts, including Facebook, LinkedIn, Instagram, YouTube, TikTok and other platforms related to your niche.
- Use word-of-mouth marketing to keep your property management company’s name top of mind for owners, landlords, and tenants.
- Design brochures, business cards and other collateral to distribute throughout your geographic area and generate prospective clients.
- Network, network, and network some more! Many local business owners join their local Chamber of Commerce and other relevant organizations and clubs to spread the word about their services.
Cost of Starting a Property Management Company
One reason many entrepreneurs are drawn to the world of property management is that the barrier to entry is relatively low. According to recent statistics, startup costs range from about $2,000-$10,000. In addition, there’s no requirement for advanced degrees. And while a real estate background can be helpful, it’s certainly not critical to start a property management company.
Get In On the Action
With dedication, thorough research, developing a solid business plan, creating a legal framework, developing efficient operational processes, hiring the right team, building out a robust digital presence, and lots of networking, you can start a property management company and position yourself for success in a competitive environment.
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